Sesbreño v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Raul Sesbreño made a money market placement of P300,000.00 with Philfinance, maturing on March 13, 1981. Philfinance issued documents including a confirmation of sale of a Delta Motors Corporation Promissory Note (DMC PN) No. 2731, a securities delivery receipt indicating the Note was in the custodianship of Pilipinas Bank, and post-dated checks. The checks were dishonored for insufficient funds upon maturity. Procedural History: Petitioner received a Denominated Custodianship Receipt (DCR) No. 10805 from Pilipinas Bank. Upon examining the original DMC PN No. 2731, petitioner discovered it was marked "NON NEGOTIABLE." Petitioner made demands on Pilipinas Bank for physical delivery of the Note and on Delta Motors Corporation for partial satisfaction of the Note. Delta Motors denied liability, citing an agreement to offset the Note against a Philfinance PN. Philfinance was placed under joint management of the SEC and Central Bank. Petitioner filed an action for damages against Delta Motors and Pilipinas Bank. The Regional Trial Court dismissed the complaint. The Court of Appeals affirmed the dismissal, holding Philfinance solely liable but not impleaded. The Petition: Petitioner sought review, arguing that respondent Court of Appeals erred in concluding he could not recover from Delta Motors, in failing to hold Pilipinas Bank solidarily liable, and in refusing to pierce the corporate veil between Philfinance, Delta Motors, and Pilipinas Bank.
Issue(s)
Whether petitioner acquired rights against Delta Motors Corporation concerning the assigned portion of DMC PN No. 2731. Whether Pilipinas Bank is liable to petitioner based on the Denominated Custodianship Receipt (DCR) No. 10805 due to breach of its custodianship undertaking. Whether the corporate veil between Philfinance, Delta Motors Corporation, and Pilipinas Bank should be pierced.
Ruling
The Supreme Court modified the decision of the Court of Appeals. It held that petitioner could not recover from Delta Motors Corporation due to the defense of compensation that had set in before notice of assignment was given. However, it found Pilipinas Bank liable for damages for breaching its undertaking under the DCR. The Court affirmed the dismissal of the case against Delta Motors Corporation and denied the prayer to pierce the corporate veil.
Ratio Decidendi
On the issue of recovery from Delta Motors Corporation: The Court distinguished between negotiation and assignment. While DMC PN No. 2731 was marked "non-negotiable," it was not "non-assignable." The assignment to petitioner was valid. However, the Court applied Article 1285 of the Civil Code, stating that a debtor who has not consented to an assignment may set up the compensation of debts prior to knowledge of the assignment. Petitioner notified Delta Motors of the assignment only after both DMC PN No. 2731 and Philfinance PN No. 143-A had matured and compensation had taken place by operation of law. Since Philfinance could no longer compel payment from Delta, petitioner, as assignee, was similarly disabled. Therefore, Delta Motors was upheld in its defense of compensation. On the issue of Pilipinas Bank's liability: The Court clarified that the DCR did not establish solidary liability on the part of Pilipinas Bank to pay the amount of the promissory note. Instead, it confirmed that Pilipinas Bank held the Note in custody for petitioner's benefit and would deliver it upon petitioner's written instructions. The Court found that Pilipinas Bank breached its undertaking by refusing to deliver the Note when demanded on April 2, 1981, before compensation had occurred. This breach constituted a failure to return the deposited security upon demand, akin to a contract of deposit. The Court held that the stipulation for delivery "thirty (30) days after its maturity" was not a valid defense against petitioner's demand, as it was not brought to petitioner's attention, ran counter to the purpose of the custodianship, and was inconsistent with Article 1988 of the Civil Code. Consequently, Pilipinas Bank was ordered to indemnify petitioner for damages. On the issue of piercing the corporate veil: The Court found no sufficient evidence to disregard the separate corporate personalities of Delta Motors Corporation and Pilipinas Bank. The mere presence of a common director, Ricardo Silverio, Sr., on the boards of the three companies (Philfinance, Delta Motors, and Pilipinas Bank) was insufficient to establish that one company was a mere alter ego of another or that corporate affairs were managed for the benefit of one. Furthermore, Philfinance had not been impleaded as a party, and jurisdiction over its person had not been acquired by the courts.
Main Doctrine
A non-negotiable instrument, though not subject to negotiation, may be assigned or transferred. The assignee acquires the rights subject to the equities and defenses available to the debtor against the assignor before notice of the assignment. A custodian bank's undertaking in a custodianship receipt, if breached, can lead to liability for damages.